GGP Inc.'s management, after reviewing with the company's board a range of strategic opportunities, has determined to "stay the course," with a continued emphasis on leasing, anchor-space redevelopment and disposition of lower-quality assets.
"Should a larger opportunity arise, we will, of course, consider it in light of our ongoing efforts to maximize value," CEO Sandeep Mathrani said Aug. 2 on the company's second-quarter earnings call.
Mathrani had said in May that the company would review strategic alternatives in an effort to close the valuation gap between public- and private-market property values. Among the real estate investment trusts, the regional mall companies trade at relatively steep discounts today as a result of negative sentiment around retail, stoked by headlines highlighting the growth of online sales platforms and secular changes in consumer behavior.
Analysts, during the Q&A segment of the call, pressed for greater detail about the potential company- and asset-level transactions management had explored in the previous three months. When Mathrani originally broached the matter of the strategic-alternative search, there was a sense of urgency, one analyst noted.
"We looked at numerous opportunities — options — compared to our current state," Mathrani said. "We looked at the quality of our retail portfolio. We looked at the ability to densify the assets, which [have] embedded value as you create live-work-play environments. We felt that the best use of our time was to stay the course; continue to lease, lease, lease; and run our business. We have a great business."
Pressed further, Mathrani said there have been bids for the company's B-grade assets from "different companies," and the company will likely sell "a couple" more assets this year.
"There are bids, and we are entertaining the bids," he said.
Mathrani at another juncture vowed to continue to sell the company's lower-quality assets at a rate of three to five per year. GGP has sold more than 60 properties at the lower end of the quality spectrum over the last few years and is currently marketing at least one. The company's A-grade assets have too much embedded growth potential to sell them at present, he said.
Additionally, Mathrani said the company will be active repurchasing shares after Aug. 4, when the restriction on repurchases around the company's strategic-review process lifts.
GGP shares were trading down around 5% in early Aug. 2 trading after the company reported second-quarter results that slightly missed the Street consensus estimate and maintained its company funds from operations guidance for 2017.